The Bank of Canada hiked interest rates by 0.25 per cent on Wednesday to 2.5 per cent, marking the first change to its benchmark in a year and the first increase in three years.
Speaking to reporters Wednesday after the announcement, Bank of Canada Governor Tiff Macklem ackowledged how raising rates will feel for Canadians and businesses, saying “look, we get it.”
“The best thing we can do is that we can get inflation down. We can prevent these higher energy prices from spreading to the prices of other goods and services. And by raising our policy rate today, that’s going to help lean against that pass-through, and it’s going to help get inflation back,” said Macklem.
“Yes, it’s not going to feel good immediately, but that’s how you get inflation back down, and that will feel good for Canadians and Canadian businesses.”
The move was widely expected by most economists as the central bank faces pressure to raise interest rates with the Iran war and other geopolitical conflicts resulting in higher prices for oil and gas, which is expected to lead to higher prices for goods and services beyond the gas pump.
Wednesday’s interest rate hike is what one economist sees as “an insurance policy” against inflation rising in the near future.
“Inflation pressures haven’t eased enough to reassure the Bank, and this move signals it is taking the supply shock seriously, even with the economy running well below full strength,” said principal economist Andrew DiCapua of the Business Data Lab and Canadian Chamber of Commerce in a statement.
“Its decision is predicated on stronger economic growth ahead, and that assumption will be tested, especially with the labour market still showing signs of slack.”
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Consumer inflation was last measured at 3.1 per cent in September, and has been hovering around three per cent since April.
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The Bank of Canada said in a statement it expects inflation to rise to about 3.5 per cent by the end of the year, as oil and gas prices push up the headline figure. When stripping away elevated gasoline prices, core measures of inflation have been closer to two per cent — the Bank’s target — but that is expected to change.
“Cost pressures are building, with high fuel prices raising the costs of production and transportation. Imported industrial and electronics input prices have also increased,” the Bank of Canada said in a statement.
“While businesses have mostly absorbed higher input costs so far, Bank surveys suggest cost pass-through will increase over the next year. Near-term household and business inflation expectations have risen, while longer-term inflation expectations remain well anchored.”
The Bank adds that its outlook for inflation is higher than its projections from July.
Financial markets and a Reuters poll of economists were betting that the central bank would deliver a quarter-point hike to its policy rate, the first increase in the key lending rate since July 2023.
“The Bank of Canada raised its overnight rate by 25bp to 2.50 per cent as widely expected today, as it looks to guard against the threat of elevated energy prices becoming a widespread inflationary problem,” said senior economist Andrew Grantham at CIBC in a statement.
The floor for borrowing rates set by the Bank of Canada was at 2.25 per cent since October 2025, when rates were cut from 2.5 per cent.
The Bank of Canada also released its updated forecasts for inflation and economic growth Wednesday, and said higher oil and gas prices are expected to continue accelerating inflation.
“With persistently elevated oil prices and refinery margins, inflation has risen in most countries,” said the Bank of Canada.
“The conflict in the Middle East is now in its eighth month and there is no clear path to resolution. The combination of higher-for-longer energy prices and increased pass-through adds to the persistence of inflation.”
The Bank of Canada said it expects the Canadian economy to grow in total by one per cent this year, and two per cent in 2027 and 2028 respectively, but stressed its forecast is “subject to considerable uncertainty,” especially because of trade tensions between Canada and the U.S.
The central bank also suggested in its statement that more hikes could be on the way.
“Looking ahead, governing council agreed we would take our decisions one meeting at a time. There could be a need to raise the policy rate further, but given the uncertainties, we will proceed carefully,” said the Bank of Canada.
Grantham says the Bank of Canada will likely proceed with caution, holding rates at 2.5 per cent at the December meeting, and hiking again in January by 0.25 per cent.
“We don’t expect that core measures of inflation will accelerate as much as the Bank fears, which should become more obvious early in 2027 and allow the Bank of Canada to then hold interest rates at 2.75 per cent throughout the remainder of next year,” said Grantham.
DiCapua said Wednesday’s hike is likely not part of a series of hikes, saying although inflation may be a risk the Bank needs to get ahead of, the economy is also sensitive to hikes right now.
“Financial conditions have already tightened, and while higher interest rates cannot fix a supply disruptions, they can further weaken demand,” said DiCapua.
“We expect the Bank to be patient from here. It has shown it is willing to act on inflation, but there are serious doubts about the economy’s ability to absorb meaningfully higher borrowing costs.”
– with a file from The Canadian Press
We’re headed into more tough times? Sounds like the liberals need to send another gravy boat to Ukraine loaded with cash, or increase spending on trans rights pamphlets in the mail.
‘Member when the interest rate in late 2022 was 4.5% and gas was 20 cents higher than it is now?
‘Member they were blaming the Ukraine war and now they blame Trump.
‘Member the news didn’t talk about affordability or fuel prices because they had variants and Trump indictment news every day.
“Member?
Ben is a brain dead zombie
Ben is the dumbest dummy on the internet
What started the ball rolling where the stupid and insane COVID shut downs.
Ben is completely blind to how much interest we pay due to the government’s out of control spending
Quit taking loans for anything other than a mortgage. Need a car ? Buy what you can afford to pay in full for.
Never apply for credit cards,payday loans,anything that requires you to pay interest.
I payed off my credit cards 20 years ago,cut them up right after and have never seeked a loan for anything other than a mortgage and it was the smartest financial decision I ever made.
It will curb your spending to your own advantage
Anyone who suggests government deficit spending is a major contributor to inflation is just wrong. Government deficit spending is a small contributor to inflation. Supply side shocks (eg. Iran war raising oil price) etc have a much greater effect on inflation. This is the majority economic view from economists.
One Bank Governor to another makes me cringe, just knowing how Carney and Macklem are getting richer while the rest of Canada are getting poorer! Disgusting!
If those who thought Thanksgiving Dinner was expensive, wait until Christmas!
“Yes, it’s not going to feel good immediately, but that’s how you get inflation back down”
Neither does the liberals ever escalating carbon, plastic, & packaging taxes, yet here we are. Those are driving inflation faster than the BoC can keep up with. Unfortunately, their voters can’t grasp that fact.
Carney’s Liberals have screwed you over food and gas prices now there moving onto your loans & mortgages.
” Elbows Up Suckers”
Anonymous
October 28, 2026 at 3:21 pm
Trump is a child, but it sounds like you are too. Grow up.
Oh and TDS now stands for Trump Definitely Sucks, so keep using it you maple morons.
Raising interest rates on the demand side of the economic equation is only going to hurt people already dealing with tariffs and higher gas prices. The supply side is much harder to fix, given that involves a war we don’t control and a US President that doesn’t understand economics. BOC should have recognized this only hurts consumers MORE.
I would take Ottawa’s efforts to decrease inflation a lot more seriously if they took seriously the infationary effects of taxing diesel. All governments should remove any and all taxes on the manufacturing, distribution and sale of diesel. If Carney and premiers were serious about slowing inflation and giving the economy a jumpstart, this would certainly help.
Should have been more. We are 1.25% below the US and it is greatly affecting our economy.
The interest rate increase is going to feel good for people like me with lots of money in the bank.
Another day another escalation of the liberal disaster in Canada. Sounds like Carney is also getting told by Europe to get lost.
Lets be very explicit. Government deficit spending is a main contributor to inflation and therefore these interest hikes. Fingers should point directly at Ottawa and their economic policies making affordability a major crisis in Canada.
So people who think this affects fixed mortgage rates are just incorrect. Canadian Bond rates (Government of Canada) determine fixed mortgage rates. The BoC rate affects short term rates and variable mortgages.
Well I have counted four idiots with TDS so far as predicted, im sure more coming.
Get your lube out because “it’s not going to feel good” says the Bank man.
I moved from Denver to Toronto in 2019. Got out of the dumpster fire called the USA. Was going bankrupt with co pays and health insurance premiums. And the gun violence in the US is much higher per capita!
cunada is a toilet bowl full of turd
One Bank governor impeding the objectives of another past (and far superior) Bank governor. Read the room Macklem!
So glad I left Canada and moved to Denver in 2019. What a dumpster fire Canada is under the Liberal regime. Sad how poorly Canada is doing.
Good. I sold my house couple years ago and put the money in a savings account and now rent at seniors building. This really helps because I’m living off the interest from my savings.
But… But… Carney is so good, he will fix everything.
Bunch of lemmings. Hey libby’s keep buying what they are selling though. Our economy is doing fantastic. I think we should give the lieberals another 10 years. Whatta you say? Things are going so swimmingly right now right?
@Typical Conservative. How is Carney doing a great job. What is better for Canadians since he was elected. He promised lower grocery prices and that didn’t happen. Carney has delivered zero.
“Wednesday’s interest rate hike is what one economist sees as “an insurance policy” against inflation rising in the near future.”
What a crock of ‘shyte’!!
Raising the price on something (interest rates) IS inflation! How does making something cost MORE lower prices?
For what it’s worth, an economist is an expert who will know tomorrow why the things they predicted yesterday didn’t happen today.
Carney said Canadians have never had it so good to bad he isn’t living in the real world now that winter is coming and brings another bill. Canadians have it so good they get to choose between food, medicine or heat to survive the winter because money is in short supply especially if you have lost your job because Carney hasn’t got a deal as he had promised all he has achieved is getting more tariffs.
You have now stopped people from buying and have affected the older people trying to retire and need the sell to do so. I think you have not living in reality. Maybe all of you need to take pay cuts.
Basically you want canada to bankrupt
I’m angry because Poilievre is failing and Carney is doing a great job! What misinformation can I spew today!!
Americans and conservatives spell paycheque “paycheck”. The conservative bots are out sad that their leader and party are polling in the basement.
Canada has one of the worst economies in the G20. We can blame it totally on Trudeau and Carney. They have not delivered their promises to Canadians
Liberalism and the resulting higher cost of living.
More paycheck for all them, less paycheck for you!
Its because Liberals have been creating the inflation to reap taxes.
The war is just the latest in a long line of excuses that has spanned a decade.
How can I blame Carney for the side effects of Orange Jesus’s holy Crusade in the Middle East? I know, I’ll just ignore all the facts I don’t like. Works every time!
Raise it to 20%
Here comes the good times the liberals promised!! Or was it pain they promised???
Trump makes life more expensive for everyone including his own citizens so keep voting for him morons
@Ben
Orange man bad right? Has nothing to do with Canada printing money hand over fist?
Another fail by Carney. Inflation is bad plus Canada economy is basically stagnant so increased interest rates will deter growth even further
Investors are expecting a hike. Inflation is on the rise because of the Iran war. Bond yields are rising too.